COLUMBUS – As the beef industry crossed its fingers waiting for results from two inconclusive bovine spongiform encephalopathy (BSE) screening tests last week, the market betted on them coming back negative.
“Future markets reacted negatively on the first trading day after the announcement, but limit-down price movements did not occur in the live cattle pit,” said Ohio State University livestock economist Brian Roe.
“Feeder cattle contracts, which have been trading at historically high levels and were looking for an excuse to cool off, did suffer limit-down movements, however.”
Continued strength. With the BSE-negative results June 30 and July 2, Roe said everything points toward the market’s continued price strength for the next year.
“The biggest issues will surround resumption of trade with Asia, the opening of the border with Canada to trade in live animals, and the pace of marketings through the remainder of 2004,” Roe said.
“I still feel that late fall and winter futures markets are undervaluing the live cattle market based on recent demand strength and projected supplies,” he continued.
Cow-calf operations. Roe projected cow-calf operators will be the primary recipients of this strong beef demand.
In addition, he said feeder calf prices should be at historic highs if no positive BSE cases are found and trade resumes at a reasonable pace.
“Cattle feeders will be somewhat pinched as they scramble to fill feedlots with highly priced feeder cattle and feed them with somewhat expensive corn,” Roe said.
See related article: BSE: Should you worry about these false positives?
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